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Kraft announces job cuts as it prepares to split business in two

Strategic Sourceror on
Tuesday, January 17, 2012

Kraft Foods announced plans this week to cut more than 1,000 jobs as it prepares to separate its business into two discrete segments.

The Associated Press reports that Kraft will cut 1,600 positions in a business cost reduction initiative as it prepares for the split. Officials from the company, based in Northfield, Illinois, said a majority of the job cuts would affect workers in the U.S. and Canada in sales and a number of other business units.

"Making these tough choices is never easy, and we recognize the impact these changes will have on many of our people and their families," Kraft executive vice president Tony Vernon affirmed. "But our plan for a more nimble company, combined with the current economic and competitive pressures, led us to this point. Taking the necessary steps now will enable us to continue investing in our beloved brands to drive growth."

Product sourcing has become exceedingly expensive for Kraft – like other manufacturers – and the company has had to raise prices on some of its food offerings to offset spikes in commodity prices. Improved supply chain management helped Kraft implement cost reduction measures, but the latest job cuts will ease the transition.

Kraft executives said in August the company would split into two separate firms, one specializing in worldwide snacks and the other a North American grocery business. The move, according to Kraft, will improve efficiency and reign in costs.

Kraft chief executive Irene Rosenfeld asserted the company has already streamlined spend management and indirect spend, and that it is readying for the pending split in its core operating segments.

"When we announced our decision to create two world-class companies last August, we said both would be leaner, more competitive organizations," Rosenfeld said in a statement. "Having the majority of our business units together in one location will provide greater development opportunities for our people and will help us continue building our brands more efficiently and collaboratively."

Kraft employs more than 127,000 throughout the world, with roughly 46,500 of those positions based in North America. To facilitate the planned split, Kraft will relocate manufacturing facilities in Tarrytown, New York, and East Hanover, New Jersey, to Chicago. The company will also close a management center in Glenview, Illinois, by the end of 2013 in anticipation of the spinoff.

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